You've got more mailbox, babe

Neville Taraporewalla

Google probably started it all. On All Fools Day this year, the internet's most popular search engine announced that it would be launching a new free e-mail service "� Gmail "� with a cavernous 1 GB of storage space.

In the process, it has completely changed the rules of the game. Users of Gmail "� which is still being beta-tested "� don't need to keep deleting files at frequent intervals to stay within their "free" limits. They don't need to scour the mailbox for old mail either.

GoogleSearch will do your job if you merely put in a few key words to identify that note from your old school chum. Most importantly, the 1 GB storage space will destroy the main attraction of paid e-mail services provided by the big boys of webmail: Yahoo! and Hotmail.

Last week, MSN was scrambling to ring-fence its users from the Google attack by upping the free storage limit for Hotmail users to 250 MB. That's not as much as Gmail, but it's a hefty 125-fold increase from its earlier free limit.

A fortnight ago, Yahoo! announced an increase to 100 MB. That's 25 times more than what it was offering members earlier. Rediffmail, which claims to have over 25 million users, has announced a 200-fold jump in limits from 5MB to 1 GB.

If Gmail has made big beautiful in mailboxes, not many are willing to admit it. Says Shriram Adukoorie, the Singapore-based director of MSN South Asia: "Our feedback from the consumer shows two things: one, users want more storage space. Two, they also want more effective protection from virus attacks and spam."

So apart from giving users a bigger mailbox, the Microsoft-owned Hotmail, which currently claims 13 million users, will also be offering an anti-virus service that will automatically scan and clean e-mail messages and attachments without requiring action at the user's end. (The current service only warns customers that there could be a virus in the mail.) Adukoorie says that the enhanced Hotmail service will be rolled out in India in July.

Yahoo! is also pushing space. For customers in India who use the yahoo.co.in local account, an upgradation to 100 MB of free storage is expected to be completed over the next two months. While 100 MB may not be great shakes for high-end users, the average user can continue storing his messages for two-to-four years.

Says Neville Taraporewalla, country head of Yahoo India, which claims over 22 million `unique' users in India: "Storage space is hardly the key issue (for e-mail users). It will never play a key role. But the question is whether a customer will prefer a 21-inch TV or a 29-inch screen."

What he means is that customers will always want more, if someone else is giving it anyway, regardless of whether they actually need additional space or not. That's probably why Rediff.com is willing to match Google byte for byte: it is also offering 1 GB of storage.

Says a confident Rohit Verma, executive vice-president at Rediff.com: "As a market leader we have nothing to fear. We have the first mover advantage in offering such huge storage space."

Smaller players who used storage space as USPs to gain customers are now having to change tack. Huge-mail.com, run by Indians in the US, was using 100 MB storage space as its main selling point. It has now been forced to match Google's 1 GB (1 GB = 1,000 MB), with a promise to offer even more to users who recommend the site to friends.

Says Anurag Sen, co-founder and CEO of Huge-mail: "We were the first to offer 100 MB in October 2003, six months before Gmail was announced. So Gmail stole the idea of offering users very large accounts for free."

Not everybody, though, is on the same trip. Times Internet, which runs indiatimes.com and claims over 10 million registered e-mail users, says 1 GB is not on. Says Rajesh Sawhney, chief operating officer of Times Internet Ltd: "Our USP is e-mail on mobile. We are dependent on deeper mobile penetration rather than net penetration (for business). So in our case there is no question of 1 GB or whatever."

Instead, the company is all set to launch a new, upgraded version of its e-mail service next month which will offer advanced mobile features. It hopes to double the number of users in a year.

But what's the attraction of getting in so many freeloading customers? The answer: e-mail is only the bait. The moolah lies elsewhere.

For most web portal players, e-mail is what brings in the traffic repeatedly; the revenues come from being able to sell them other services like mobile ringtones, dating services and products such as books, music and T-shirts.

The four of them "� Yahoo!, Hotmail, Rediff and Indiatimes "� together have around 70 million e-mail user IDs. Even assuming a huge overlap, and some non-serious users, industry estimates put the number of active e-mail accounts at around 20-30 million. And this number is growing at a fast clip of 30 per cent a year.

The recently constituted Internet Online Association "� made up of portal companies "� expects 100 million customers to log on to the internet by 2007.

More importantly, it also expects 12 million people to access the internet through their mobile phones "� especially with GPRS (general packet radio switching) and Edge phones becoming more and more popular.

Web advertising is another area of hope. In 2003-2004, industry estimates put web advertising expenditure at around Rs 70 crore; this could more than treble to around Rs 250 crore by 2007, accounting for about 2.5 per cent of total adspends. The early signs are that it's already beginning to happen. Yahoo India, for instance, saw its advertising revenues and number of advertisers grow by a whopping 100 per cent last year.

Companies see some inherent advantages in using the internet. ICICI Prudential, which spends more than one per cent of its ad and marketing budgets on the internet, has tied up with e-mail companies to solicit business and sends over 600,000 e-mails every month.

Says Abhishek Bhatia, head of marketing at ICICI Pru: "It's a cost-effective medium compared with direct mailers even though the response rate, at 0.5-1.5 per cent of users e-mailed, is low."

While this may justify efforts to lure more e-mail users, the moot point is whether huge mailboxes are necessary to prevent current users from defecting to Gmail. Says Sawhney of Times Internet: "The Gmail threat has been blown out of proportion. For routine users, 1 GB makes no sense as 99 per cent of them will not use more than 30-40 MB."

More importantly, there is a natural exit barrier. Long-term users of e-mail IDs will not dump one e-mail service for another because so many others who send them mails will have to be informed of the changes.

Some argue that the expansion of the user market is dependent not so much on storage space but on deeper broadband penetration. Says a senior executive at Sify.com: "You might want to send a large attachment through e-mail, but in a dial-up connection (where download speeds are low) you sometimes won't be able to open it at all. Or else the process will be too slow."

Says the CEO of another portal company: "The existing (Google) servers could just collapse if they are asked to search thousands of mails "� which is the service Google is offering. I also don't see why people would like to retain all their mails (in the mailbox)."

The pro-storage brigade thinks differently. Says Adukoorie: "More storage space will help increase per user pageviews (the number of pages downloaded) and he will spend more time on the portal. That has implications for revenue."

The question, though, is whether the costs of offering more storage, which the user may or may not need, will outweigh the revenues. More storage space means you need more servers and more bandwidth (depending on what you expect the average usage to be). Yahoo!, for instance, is putting up a fourth server farm in India to meet the new expansion.

What many service providers may be counting on is that most users will not be in any hurry to grab the space and choke bandwidth. Verma of Rediff admits as much: "We are not saying that the email user will use 1 GB of space tomorrow. But we feel that it will give him unlimited space."

Meanwhile, e-mail companies are busy freeing up existing space by chopping infrequent users or unused IDs. Rediff, for instance, has freed up 15 million e-mail addresses that have not been used for years. To stay ahead in the e-mail race, companies are also offering new options and innovations. One such is e-mail in regional languages. The new Rediffmail offers users the option to write mail in 11 Indian languages with special emoticons.

Says Taraporewalla: "Customers are looking at fast and innovative services from portals." Yahoo! is, therefore, planning a new messenger from July this year "� called Avatar "� through which users can customise their images as per their personalities and send these to friends. (MSN too will be rolling out avatars worldwide). The Yahoo! service will also provide a LAUNCHcast Radio, where you can create your own radio station and listen to music you like.

And your online status message shows people what you're listening to. But just in case you don't want some "friends" to know you're around, you can hide your online status from these specific people.

MSN's Hotmail also recently launched an upgraded messenger offering an array of features, including fast video conferencing integration with Microsoft tablet PCs. Effective spam protection is another USP. Yahoo India has developed a proprietary spam protection software which ensures that 95 per cent of such mail will not hit your mailbox.

Moreover, it plans to offer its Indian ID users disposable email addresses. If you don't want to give your real email ID to someone "� say an e-commerce site you bought a book from "� you can create a new e-mail address (or even 500 of them) for that specific purpose. But one casualty of the trend towards bigger free mailboxes will surely be paid e-mail services.

Verma admits that extra storage was the USP for paid e-mails. "The premium on space may take a hit. But the hit could be for a short term," he says hopefully. Sawhney of Times Internet, however, believes that Gmail will not kill paid e-mail.

He may be right over the long run. But in the short run, paid e-mail is a goner. The cheque is not in the mail.